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lecture .1
GLOBAL
Hospitality Management

What is Hospitality?

Kindness in welcoming strangers or guests is called hospitality.

It’s a massive industry encompassing all form of transport, tourism, accommodation, eating,
drinking, entertainment, recreation, and other activities.

So, Hospitality industry consists of a large number of different types of business and each
one giving its own means of income generation.

Types of Business:
Hotel
Self-eating accommodation
Guest homes
Restaurants
Bars
Tourist resort
Gyms.

Nature of Demand for Hospitality Services

Demand may be change with the change of tourist flow, tourist motivation, taste &
preference, govt. action, special events, festivals general economic condition & so on.
Economical, political and environmental changes including natural calamities, terrorism &
wars, world wide diseases in epidemic form SARS, madcow, cholera, etc can also affect
hospitality industry.

1986: 25% fall of tourist from North America to UK for fear of Arab reprisal due to Libyan
bombing.

1991: fall of 22% American visitor to UK for war &consequent recession.

1991: 21.5% dropped in Malaysia due to gulf war.

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Nature of Income (UK experience)

Main Product
Room/accommodation hires constitution around: 45%

Subsequent earning Product

Food & Beverage sales (restaurants, coffee shop, room services, etc) 34%
Beverages (hard) 14%
Shop rentals 1%
Minor operating reports like telephone, 5%
Others laundry, leisure 1%

Hospitality Management System

Labour intensive industry

The management system is name as we find in other services organization. But because of
so many products are within management system is quite complicated. (It’s a team work)
In Hospitality industry an effective management system, according to Blanchard (author of
the one mnt. Manager) comprises:

a. Acceptability: everyone has to be dear one.

b. Data system: Performance analysis
c. Feedback: From customer to employees so that they can improve (monitoring
system)
d. Recognition: Good performance must be awarded.
e. Training:
Supervisors are there to report on performances of employees graded are:
U (Unsatisfactory)
S (Satisfactory)
E (Exceptional)

For good performance, modification is need. Secondary motivation elements are memories.
Following are improved.

1. Need to approval
2. Need to belong
3. Need for achievement purpose
4. Interest in the task
5. Pride (feel proud what he is doing)
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For ensuring this Management needs to:

1. Developed staff oriented policies & incentives

2. Appropriate salaries & incentives.
3. Helpful & friendly supervision
4. Congenial & friendly working environment
5. Understanding of individual personal life
6. Proper recognition of status.
7. Job security

According to Mckinsey & co, 7 elements are required for successful performance strategy

1. Objectives : What org. wants to achieve

2. Structure : Human & physical resources needed to achieve objectives
3. Systems : Methods to use to achieve objective compatible to human &
physical resources
4. Skill :knowledge & info- required for human recourses & training
to fill any gap
5. Staff : Employee number along with experience & skill
6. Style :Type of operation & how it wants to be perceived by
customers.
7. Values : Overall image by enhancing customer satisfaction, staff
loyalty & satisfaction

Organization Structure:
The organization is mainly marketing oriented Organization. Organization structure on the
basis of marketing fundamentals:

Functional departments
Marketing
Executives

Departmental Departmental Departmental

Executives Executives Executives

Regional Management
For world chain Hotels
Each region is self sufficient marketing structure

Product line Management

Food & Beverage
Conference & Banqueting managers
Restaurant Manager
Rooms Manager
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Marketing Management
For the customer groups example Holiday package marketing, Meeting,
Seminar etc

Different Position to Manage the Integrated Operation:

1. Marketing Director (Sometimes manager)

2. Sales Director: In big organization apart from marketing director, there is sales
director, All activities relatives to sales & developing & contacting corporate customer
groups including travel agents, tower operators
3. Operations Manager: Looking after customer from moment he/she makes a booking
Operations Manager is often know as accommodation manager too.
4. Sales promotion Manager
5. Direct Mail manager: Maintain a database customer and keep contact . relationship
network manager
6. Telemarketing Manager: In support to direct main manager.
7. Product ling manager: According different products of the Hotel : Food &
Beverage, conference & Banqueting restaurant entertainment, leisure etc.

PLANNING

Planning is an integrated approach. The first thing that we have to know is “what we are
offering --- what our customers want”.
Planning must be need based. The need may vary from customer to customer. It is not
possible to cater the needs of all customers in a “property”. Therefore, the first job in
marketing plan is to target the specific segment of the market. The core service remaining
same, the extent of hospitality services may vary as per the real need and psychological
needs of the customers :
Core services
Core services
turned into Hospi-
tality concept
Auxiliary services
added to Hospitality
services
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Marketing strategies relating to hospitality products :

The followings are the key issues that should be addressed to develop marketing strategies :

1. Consider company’s goal and mission

2. recognize financial, physical and human resources available
3. analyzing SWOT
4. develop and target most appropriate customer-mix
5. set marketing budget
6. develop strategies for each element of marketing mix
7. out line detailed operational tactics
8. change as necessary

From a micro viewpoint marketing plan for a large ‘property’ with a complexity of product
lines requires separate sets of strategies for :

- the property as a complete entity

- each product line and item
- each target market

However, apart from the strategies in relation to marketing mix elements, ‘Positioning’
strategy is very crucial for the hospitality business.
Position is creation of ‘DAB’, meaning, difference, advantage, and benefit. Positioning is
what people think, know, feel, or believe about a place or product or establishment.

Hence a difference between a Four-star and Five star hotel can often be
no more than a public perception, usually a strategic position created by
the management.

Therefore, positioning is the imagery that has been created in the minds of the customer.

The major forms of positioning :

- the physical presence of the place : where it is and how it looks from
outside. Design. paint, sign, decoration, street, surroundings etc are the components of
physical presence. These are known as Exterior Physical Evidences.
- First impression is said to be lasting. So attractive and tasteful exterior
evidence is very important.
- Interior design layout, fittings, decor etc
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- Recommendations – the pass-on value of word-of- mouth promotion

probably the strongest means of gaining customer heart. It has been seen that about 85% of
customers come from pass-on recommendations.
- Publicity is another strong tool for positioning. Media reporting of any
events, visiting celebrities stay etc are also important and effective tool.
- Advertising, brochures, other publications may create positive impression in
the minds of the customers.
- The Attitude and appearance of the staffs are long lasting tools for
positioning.
- Prices and value offerings sometimes may also create an image.
- The ambience - music, noise, smell etc also can create a positive and
negative image.
- Name, slogan, symbol or logo may also contribute to increase the desired
position of the property.

The Steps in Strategic Positioning :

- Target the customer mix you want.

- Find out what they expect
- Develop the services and products or facilities to meet the need and want of
the target customers
- Develop a staff commitment
- Build a sustainable positioning strategy.

Pricing Strategy :

In a hotel, it is the room rate which sets the pricing levels for the rest of hotel’s products.
Presently hospitality industry is a fiercely competitive and sensitive to economic
conditions. Consequently, the relationship between rates and occupancy has to be finely
tuned.
Price fixation in perfect market entails the following equation :

Price = Operating cost + Capital recovery cost + Profit + Forecasted number of customers.

But hardly we get a situation which may be termed as a perfect market.

The Hospitality Industry normally follows the following Pricing methods :

- Target profit pricing : fixation of price based on average occupancy which is

expected to provide adequate return.
- Perceive-value pricing : based on value or benefits offered.
- Going-rate pricing :
- Price ranging : separate prices for different types, sizes and decor.
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- Value-added pricing : discounting the existing services and facilities

coupled with going rate.
- Price Skimming : high profile positioning. Skimming is taking cream of the
market before the competitor comes.

PRICING OBJECTIVE :

The objectives are usually :

- survival
- profit maximization
- increasing market share
- quality leadership
- capital recovery.

PRACTICES WITH PRICING STRATEGIES :

(1) offer prices differently on different days and at different times of the
year. Rates may vary to attract different customer segments, such as, tour wholesalers,
large companies, conference organizers, and frequent travelers.
(2) Developing Holiday packages such as, a three day stay at the property
combined with sight seeing tours or a special interest package.
(3) Special discounted rooms negotiated with tour wholesalers, travel
agents, tour operators, and sometime even with the transport companies, for example, the
airlines.
(4) Business travelers are the most frequent visitors and users of hospitality
services. Special incentive rates are generally negotiated. Additional attractions such as
secretarial assistance, computers, fax photocopying meeting rooms, video conferencing and
language translator facilities are offered to the business travelers.
(5) Another variant strategy is to enroll in a special club which provides not
only discounted prices to the members, but also discounts with participating stores, airlines,
car hires etc.
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SECTION : 2 : Hospitality Services Strategies

According to Philip Kotler : “A service is any act or performance that one party
can offer to another that is essentially intangible and does not result in the ownership of
anything. Its production may or may not be tied to a physical product.”

If we analyze the definition of services we can get some specific characteristics of

service. These are :
• intangibility
• inseparability
• heterogeneity
• perishability
• ownership

Hospitality business provides a guest with a place where he feels welcome, appreciation,
relaxed, and have an enjoyable experiences. The product mix consists of accommodation,
restaurant, bars and a range of ancillary products which vary with the establishments.

Hospitality business is a team work, employees work together jointly to achieve the
objectives of ‘excellent guest experiences’. It has a ‘flat’ management structure. So
importance of a dishwasher is no less than the managing director.

In hospitality industry, quality of services is now a top management issue. How can we do
that? There is no shortcut to it. A ‘total quality management’ concept has to be applied and
practiced in a hospitality industry. In order to do so the following steps are necessary :

(a). Establish customer needs and wants : It involves segment identification and market
analysis.

(b) Asking the customer : Very informal type of research technique of asking the customers
about their feelings, opinions, suggestions etc.

(c) Set objectives for improvement or changes : Why this change? The outcome of the
improvement or change should be assessed.

(d) Allocate tasks and responsibilities :

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(e) Train staff :

(f) Remove demotivating systems and staff :

(g) Gain commitment to the objectives and strategies :

(h) Make physical changes where necessary :

(i) Experiment with the changes :

(j) Measure and manage :

(k) Modify where necessary, measure regain :

Strategies with Catering Services :

Key concerns of restaurants will centre around menu development, analysis of current
offerings, packaging or presentation, brand decision, design and décor, music, and the
layout.
Probably the most important decision a restaurant operator can make concerns the type of
food and beverages that will be offered. The following decisions are important :

(a) Concept compatibility : Italian restaurant should focus o0n dishes that
target customers associated with Italian food.
(b) Quality : Quality concept is vague. But that must or exceed the
consumer’s expectation.
(c) Selection : The number of items on a menu is generally unimportant.
There is a tendency for many restaurant operators to have an extensive menu so that there
is something on the menu for each one. When it occurs, order preparation time and
equipment costs increase, food cost escalates, spoilage increases, quality suffers, labor cost
goes up, morale of kitchen personnel goes down.
(d) Hire expert and experienced cooks and chefs.
(e) Analyze competitor’s menu or offerings.
(f) Cross utilization : this is use of limited number of ingredients to prepare
several different menu items.
(g) Put importance to nutritional value :
(h) Menu design and layout : most menu starts with appetizers , and end
with deserts or possibly with some specialty drinks.
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GLOBAL HOSPITALITY MANAGEMENT : EVOLUTION & TREND

General definition of Hotels : The WTO defines :

Hotels and similar establishments . . . are typified as being arranged in rooms, in number
exceeding a specific minimum; as coming under a common management; as providing
certain services, including room services, daily bed making, and cleaning of sanitary
facilities; as grouped in classes and categories according to the services and facilities
provided.

Interpretations may include : hotels, private hotels, residential hotels, guest houses,
boarding houses, lodging houses, bed and breakfasts, inns, pensions, motels, youth hostels,
auberges, posuadas, and so on.

Slattery et al. (1966) categorized a hotel through one of the following definitions :

● Owned
● Leased which includes properties which are rented as well as sale and leaseback hotels.

● Management contracts with equity – which may be seen to be a growing trend in face of
increasing competition.

● Management contracts (equity free) – the most common form of contracts particularly
amongst major hotel brands

● Franchised hotels owned and operated by independent hoteliers and chains who pay a
franchise fee to operate their hotel under a major brand, thereby giving access to
reservation system, corporate marketing, training and purchasing etc. Major brands that are
franchise dare Holiday Inn World wide, Accor, Marriott International, Hilton Hotels, ITT
Corporation.

There are some invisible hotel companies operating with little outward presence to public.
They manage hotels under different brand names. There is another pattern where the major
activities are managed by different companies. For example, in a brand ‘A’ hotel that is
owned by company ‘X’, marketed by company ‘Y’, and managed by company ‘Z’.

The International Hotel Industry :

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● WTO reports that in terms of revenue, Europe accounted for the largest share with 39.5
percent (around 100 billion US$), followed by the Americans with 32 percent (81 billion
US$).

●Europe and the Americas again hold first and second position in terms of hotel
establishments (with 55 and 28 percent respectively).
●In terms of rooms the two areas hold 45 percent and 37 percent respectively.

●In terms of percent of bed capacity, Europe is having 44 percent and the Americas are 37
percent.

●Although Asia-Pacific commands only 12 percent of total hotels but due to higher
average size of the properties, their share of rooms and bed capacity is comparatively
higher at 14 percent.

● Staff to room ratio demonstrates interesting intra-regional variances, with the highest in
Africa at 3.5 employees per room, the Middle East (2.5 : 1) and then Asia-Pacific (1.7 :1),
and Europe (0.5 : 1).

THE SIZE AND SCALE OF THE HOTEL INDUSTRY

Regions Revenue Hotels Rooms Tourism Employees

(US$ m) (Regd) (000) Receipts (000)
(US$m)
Africa 6,300 10,769 384 7,165 1,259
Americas 81,095 87,969 4,494 100,138 4,062
Asia- 46,259 37,148 1,701 77,242 2,862
Pacific
Europe 100,012 171,123 5,492 207,653 2,679
Total 252,904 311,744 12,249 399,448 11,317
Source : World Tourism Organization 1997.

Industry Development :

The year 1946 saw the birth of the First international hotel chain with the founding of
Inter-Continental by Pan American Airways. Thereafter followed Hilton and Sheraton,
whose strategy was to create small pieces of American ‘terra firma’ in distant lands for the
American businessmen. Dunning and McQueen reported that eight of the top ten hotel
companies were American owned.

Diversification : Hotel corporations are increasingly diversifying into related service

industries, including health care, cruise liners, gaming and time share. Marriott, Accor,
Hyatt Hotels corp and Holiday Inns have expressed interest in different health-related
projects. Marriott has built certain life-care retirement communities, Accor has created
subsidiary ‘Hotelia’ and Hyatt has two ‘Classic Residence’ projects, which are assisted-
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living retirement communities, giving residents access to nursing and other support
services as they grow old. Hilton, Promus, and the Club Mediterranean are investing
heavily in gambling facilities and casinos.

Time shares, although a bit shaky phenomenon, is gradually becoming popular in many of
the countries. There are three types of timeshare – fixed week, floating weak within season,
and points, which can be used anywhere at any time subject to restrictions. There are 4500
timeshare resorts worldwide in 81 different countries. UK has the majority of European
timeshare owners (some 700,000) and most of these consist of beach properties in Spain or
Portugal.

Branding : Choice hotels was one of the first companies to develop a multi-branding
approach, with a range of different offerings to appeal to each price segment. The
Economist conducted a survey on brand awareness and found that three-quarters of
business travelers and two-thirds of leisure travelers are brand conscious when choosing
their hotels. Although hotel branding seems to have some limitations, but gradually it is
becoming a practice worldwide with the regional chains, and also with chain affiliations to
practice ‘Think global, Act global’.

Key International Players : Top 20 companies in the world remained fairly consistent.
However, some regional Brands are coming up. The top Brands are :

● US ownership
Starwood Lodging Trust (owns ITT Sheraton and Westin brands)
Cendant ( owns Hospitality Franchise Systems)
Patriot American
Choice Hotels International
Marriott International (owns Ritz Carlton)
Hyatt International & Hyatt Hotels Corporation
Radisson Hotels International
Promus Corporation (owns Doubletree brand)
Hilton Hotel Corporation
Delta Hotels
● UK ownership
Holiday Inn Worldwide (owned by Bass)
Inter-Continental (owned by Bass)
Forte
Hilton International (owned by Ladbroke).
● French ownership
Accor
Club Mediterranee
Societe du Louvre
● Thai ownership
Dusit Thani
● Japanese ownership
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Nikko hotels
Tokyu/Pan hotels
● Chinese ownership
Shangri-La
● Spanish ownership
Grupo Sol Melia
● Scandinavian ownership
Scandic hotels
●German ownership
Dorint hotels
Kempinski hotels
Steigenberger hotels
● Indian ownership
Omni hotels
The Taj group
● Others
Southern Pacific (Australasia)
Four Seasons/Regent (Canadian)

During the last quarter (1970-90), there was a tremendous growth in the industry, and there
was an increase of more than 300 percent in room growth; from almost half a million to
more than 2 million.
After 90’s this industry grew at a tremendously unbelievable rate. According to the
American Hotel & Lodging Association, AH&LA is having 47,584 properties, 4.4 million
rooms, $105.3 billion in sales, $12.8 billion in pretax profit61.1 percent average occupancy
rate and $50.42 revenue per available room (RevPAR) in 2003.

Hotel accommodations are heavily concentrated in Europe and North America, with
Europe accounting for 48 percent of the world’s room supply and the US accounting for
27 percent, Asia-Pacific 14 percent, and the African region 3 percent while Middle-East
1.5 percent.

Who are the customers? According to the AH&LA, 24 percent are on vacation, 29 percent
are transient business travelers, 25 percent are attending conferences and meetings, 22
percent are visiting for other reasons.
The typical business room night is generated by a male (71 percent), age 35 – 54
(53 percent), employed with a professional or managerial position (50 percent), and earning
an average yearly household income of $83 thousand. Typically these guests travel alone
(76 percent).
The typical leisure room night is generated by two adults (52 percent), ages 35 -54
(45 percent), and travel by autos (73 percent).

Average stay : Business travelers : 40 percent spend one night, 24 percent spend two
nights, 36 percent spend three or more nights.
Leisure traveler : 47 percent spend one night, 26 percent spend two nights, 27 percent
spend three or more nights.
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TYPES OF

ACCOMMODATION

Non Commercial Commercial

Private Non-profit Institution Hotels Motels Bed& Time-

breakfast share

-Private -Hostels -College/ -Upscale - Resort -Upscale -Fixed week

homes -Universities hotels
- Deluxe - Floating week
-Midrange
-Home -Shelters -Spa & - Spa - Points
Exchange health care

-YM/YWCA - Luxury -Casino -Budget

-Midrange

-Suite

-Meetings &
Convention hotels

Source : Tourism Principles, Practices Philosophies. Goeldner & Ritchie. P-155.

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THAILAND

Thailand is having borders with Myanmar, Laos, Cambodia and Malaysia. The geography
of Thailand comprises four main regions. The northern mountainous region includes
many cultural ruins, temples and distinct ethnic hill tribes set around the ancient city of
Chiang Mai. The semi-arid Korat Plateau is set in the northeast region of Thailand. Here
the Mun and Chi rivers drain into the Mekong river at the border of Laos.

The central region, Thailand’s most fertile and populous. To the south is the capital,
Bangkok. The southern region, which occupies much of the Malay Peninsula, offers
visitors the opportunity to experience outstanding coastal and beach resort destination.

The Visit Thailand Year (VTY) launched in 1987 succeeded in stimulating annual
increases in visitor arrivals of 20 percent in the following years. But the success of this
campaign, in its hindside, had a question. A general shortage of hotel accommodation
was the experience of Thai tourism. As a result, coupled with deliberate government tax
incentive policies, there was a big boom in hotel development in 1989.

Between 1986 and 1990 the Thai hotel sector experienced a 44 percent increase in
room availability. This resulted in an oversupply of accommodation in the 1990s which,
in combination with domestic and international political instability, resulted in the 1991
Thai tourism slump. In 1991 international visitors arrival declined by 4 percent, and
tourism revenue fell by 10 percent.

However, in 1992 international tourist arrivals and revenue from tourism resumed the
growth pattern of pre-1991. It was observed that there was a continued economic growth of
the Asia-Pacific economies. As a result, East Asian countries assumed greater importance
as a source of tourist arrivals, at the expense of Europe and the USA. Malaysia,
Singapore, Taiwan, and South Korean visitors provided the tonic to the hangover of
1991.

The lifting of Thai immigration restrictions in 1993, with the consequence of creating
new sources of inbound tourists, also contributed to this end. Dramatic rise of Chinese
visitors arrival was seen in 1993.

CULTURAL DIMENSION :
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In December 1997, the “AMAZING THAILAND” tourism promotional campaign was

launched in Bangkok. This Campaign used Thai culture as a vehicle for attracting 16
million tourists and 580 billion “Baht” to Thailand in 1998 – 99.

Amazing Thailand was extended over two years with cultural performances, handicraft
displays, traditional dancing and processions throughout. The Tourism Authority of
Thailand (TAT) promoted “Amazing Thailand” internationally through its 17 international
offices.

Many Thai festivals are linked to the Buddhist temples, rituals and the lunar calendar.
SONGKRAN, the Thai New Year celebration proved to be a great domestic tourism
component. For example, Songkran in 1998 surprised Thai travel industry with most hotels
and resorts in major provincial destinations operating at capacity.

Cultural dimension is an important component of tourism. However, there was a

widespread concern in Thailand that Thai culture is being diluted through tourist
interaction. This concern is exemplified by the case of PADAUNG refugees of Myanmar
who were held prisoners at the Thai-Myanmar border. Police raids in April 1998 to refugee
camps exposed the fact that Thai entrepreneurs used the girls for profit as a part of
cultural tourism attractions. The Padaung women who adorn their necks with brass-coil
up to 10 cms. They were known as “Giraffe Women.” The camp became a “human zoo”.

More that 10,000 tourist visited the so called human zoo in 1997. The visit of human zoo
resulted in the abandonment of agricultural practices because most male villagers became
idle.

ENVIRONMENT :

Relationship between tourism and state of natural environment is interdependent. Apart

from degradation of nature because of industrialization, in Thailand the degradation of
resort destinations and beaches has been the result of poor planning in combination with
overwhelming growth rates of tourists arrivals. Pattaya, once the queen of south-east
Asia’s beach resort, has been transformed from a tranquil fishing village to a 3 million
annual visitor in a span of almost two decades.

Ecotourism offers real possibilities for a new direction in Thai tourism. The outstanding
bird watching ecotourism resources of DOJ INTHANON National park in northern
region, was visited by 9,00, 000 tourists in 1993. If Thailand wants tourism to play an
important role in its economy, there is no way but to develop and implement sound
environmental policies.

TOURISM MARKET OF THAILAND

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After the hangover of 1991 – 1992, Thai inbound markets continued to grow and statistics
show that about 7 million visitors visited Thailand in 1995. Thailand’s National economic
plan set a target for five years (1997-2001) in the following way :

(a) increase in foreign currency income by 14 percent each year on average.

(b) Increase in foreign tourist arrivals by 6 percent each year on average.
(c) Increase in Thai tourists traveling in Thailand by 2 percent per year.

Growth plans include establishment of the road and railway networks connecting
Indochina, more border checkposts, streamlining visitors’ formalities, and development
of hotels and airports.

MARKETING AND PROMOTION

TAT was established in 1960. TAT is responsible for promotion of tourism, collection of
tourism statistics, development of plans for tourist areas, and human resources
development. The thrust of TAT’s promotional efforts focus on “Amazing Thailand” for
which a budget of 2.67 billion Baht was initially approved. The goals included not only to
achieve the targets as fixed up by the National economic plan, but also aimed at
popularizing Amazing Thailand with a view to attain status as the Southeast Asian Tourism
hub.

‘Amazing Thailand’ promotional efforts were coordinated through 22 domestic and 17

international TAT offices. In 1997 the TAT requested an additional budget of 1.13 billion
Baht. However, the tourism experts are of the opinion that TAT spent too much on
promoting tourism overlooking the degradation of Thailand’s natural and cultural
attractions due to over-promotion and under management of tourism resources.
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HOSPITALITY INDUSTRY IN INDIA

Hotels in India are categorized into two types : approved and unapproved hotels. The
Ministry of Tourism grants approval to hotels at the project stage and classify them into
one of the star categories. This approval status is voluntary; but only the approved hotels
can avail of various incentives, import license, and other benefits from the govt. Majority
of the hotels are of unapproved type.

The emerging tourism and hospitality industry in India mainly could be attributed to :

- Strong domestic travel trend

- Positive economic growth
- Good investment opportunity.

The following sections will try to analyze the growth and development of Indian hospitality
industry.

India periodically conducts an All Indian hotel Industry survey. The analysis is done
mainly on the results of such a survey. The survey presents a study of 1065 hotels having
74,112 rooms across various cities of India. In the survey it was found that the average
number of rooms per hotel is 62 percent(2004-2005).

Occupancy : As of occupancy rate, Visakhapatnam was the market leader registering 81

percent. Bangalore achieved the second- highest occupancy at 80 per cent. All India
average occupancy rate was 64 percent. In one year (over 2003) occupancy rate increased
by 6.5 percent, but at the same time average room rate increased by 27 percent.
Occu8pancy rate ranged between 46 percent to 72 percent. Average range of rates (for
five-star and one-star hotels) had a greater spread from Rs 5,500 to Rs 643.

Revenue : All India average revenue per available room (RevPAR) was Rs 2170 in
2004-05. Rooms revenue is the most important source of hotels’ overall profitability.
Average profitability for the five-star hotels was 58 percent; and for four-star, it was 60
percent. All India hotels of all categories represent 57 percent profitability on total
revenue. House profit (gross operating profit after deducting franchise and management
fees) as a percentage of revenue, increased 41 percent in 2004-05 from 35 percent in 2003-
04. Rise in revenue collection was mainly due to two reasons : (i) increase in occupancy,
and (ii) increased average rate. Revenue Per Available Room (RevPAR) growth was higher
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in case of four-star hotels (42%), and an All Indian RevPAR growth was at 35 percent in
2004-05.
All India average revenue per hotel has grown significantly from Rs 9.15 crore in 2003-04
to Rs 11.49 crore in 2004-05. (?). All India average Net Income (income before
depreciation, interest payments and taxes) per hotel increased from Rs 2.8 crore in 2003-04
to Rs 4 crore in 2004-05.

Expenditures : Departmental expenditure consists of direct cost (raw materials for

running the hotel services); operating expenses are differently maintained. Operating
expenses include energy, administrative and general expenses. Total Departmental
expenses as a percentage of total revenue was 31 percent in 2004-05. Departmental
expenses showed a declining trend over previous years; and so as the food and beverage
expenses. In 2004-05, total departmental expenses as a percentage of total departmental
revenue declined over the previous years. It may be because of the reasons of increased
room rates, and use of technology in hotels.

Maximum utilization of energy management systems continues to be in the five-star deluxe

categories. The average energy cost POR was Rs 762 in 2004-05 ( in 2003-04 it was Rs
758). The heritage hotels gained the maximum benefit of energy management system.
Decrease in energy cost of heritage hotels was Rs 499 in 2004-05 over Rs 637 in 2003-04.

Foreign occupants : Percentage of foreign visitors increased over the last year. Of foreign
visitors, 16 percent was from UK, 13 percent was from USA, and France provided 7
percent.
However, the most important segment for the Indian hotel industry is the domestic travelers
who had a share of 78 percent in 2004-05 but the domestic segment showed a marginal
decline over recent past years.

Average Stay : All India average stay of a business traveler has increased from 2.0 days
to 2.4 days. There is also marginal increase in average stay by the foreign visitors in Indian
hotels.
Average monthly occupancy was highest in the months of :

December : 72%
November : 68%
January &
February : 66%

The month of July is seen to be most dull month in terms of tourist arrival.

Mode of payment : Use of Credit cards is gradually increasing as a method of payment

for the services in Indian hotel industry. Almost 47 percent of the payments are done by
Credit cards at five-star hotels. Visa was the most widely used credit card by the hotel
guests (42%), followed by Mastercard (37%).
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Promotion : Print advertising was the most popular media used by the Indian hotel
Industry with 92 percent using print media for promotion. However, 83 percent of the
hotels also used direct mail. Radio advertising featured as the least utilized media at 8.4
percent. All five-star hotels are using there own websites.